Texas Deed of Trust Laws

By Larissa Bodniowycz, J.D.

Texas Deed of Trust Laws

By Larissa Bodniowycz, J.D.

When purchasing a new home, most people obtain a loan to help finance the purchase. In Texas, when a homeowner finances the purchase of property, a deed of trust is typically used to secure the loan. The purpose of a deed of trust is the same as a mortgage: to ensure the lender can recover some of their loan by selling the home if the borrower stops paying.

Three businesspeople smiling at each other sitting around a table

A Borrower, Lender, and Trustee

Deeds of trust include three parties: the borrower, the lender, and a trustee. The borrower borrows money from the lender to purchase the property he wants.

The trustee is a disinterested person or business entity that holds title to the property, in trust, until the borrower pays off the loan. Individuals can serve as trustees under Texas law, however, most lenders require an institutional trustee, like an escrow company.

Deed of Trust Document

The deed of trust document contains basic information about the transaction including the legal description of the property, payment terms, and what happens if the borrower defaults.

A notary and two witnesses are present when the borrower signs the deed of trust. The deed of trust is typically filed in the property county's records. It provides notice of a lien on the property.

Trustee's Duties to Lender and Borrower

The trustee under a deed of trust is a disinterested third party. Although it may seem like they work for the lender since they will sell off the house if the borrower defaults, the trustee actually owes duties to both the lender and the borrower.

Both the deed of trust and Chapter 51 of the Texas Property Code present the specific duties a trustee owes. If a trustee does not meet her obligations, options include her removal and replacement.

Prepare for a Release of Lien

When the borrower pays off his loan, the next step is to prepare a release of a lien to file in the same county as the deed of trust. The release of a lien provides notice that there's no longer a lien on the property and thereby proves the borrower owns the property outright.

Power of Sale aka Nonjudicial Foreclosure

Most deeds of trust include a “power of sale" clause, also known as a nonjudicial foreclosure. This clause permits the trustee to sell the property to pay off the loan balance without having to file a court case if the borrower defaults.

Nonjudicial foreclosures are typically much quicker and easier for the lender than foreclosures that must go through court. However, there are still rules that the lender and trustee must follow when executing a nonjudicial foreclosure. These rules are found in the deed of trust and in Texas' Property Code. The rules cover topics such as how much notice the borrower requires and when the sale can occur.

Deeds of trust are legal documents often difficult to understand. A personal attorney licensed in Texas can help you understand your rights and responsibilities under a deed of trust.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.